How to Invest in Discord IPO: Buy Discord Stock

As a popular San Francisco-based software company, Discord manages an instant messaging platform and mobile app where users interact over video, audio, and text. You can think of Discord as loosely similar to Meta’s Whatsapp, Pavel Durov’s Telegram, or Amazon’s Twitch. 

It’s popular within the gaming community, with Fortnite making the largest Discord server (chat room) at over 571,000 members and Minecraft at over 569,000 members. We fully expect these numbers to increase. 

As of the end of 2021, Discord touted 13.5 million active servers, a 101% increase over 2020. Similarly, it noted a 40% increase over 2020 to over 140 million monthly active users. In 2017, this number was 10 million only!

Not all of its servers remain dedicated to gaming. It’s also popular with community clubs, study groups, and international chat rooms. Further, it’s compatible with Windows, iOS, and Android. It’s able to sync (“integrate”) its data with other apps such as YouTube, Twitch, and so on.

Initially, Discord’s IPO date was expected for 2022. Yet due to market conditions, it’s more likely to occur in 2023. This estimation could change pursuant to the status of S&P 500’s current levels.

As of the end of 2021, Discord’s valuation stood at an impressive 15 billion USD, a 114% increase over 2020. This is in line with the doubling monthly active servers and a so far successful push to non-gaming sectors. 

Given that Discord rejected a 12 billion USD takeover offer from Microsoft, we expect the platform to remain independent and use any IPO proceeds to expand its service offering. 

It uniquely has the position to attract non-gamers (i.e., WhatsApp) and gamers (i.e., Twitch) alike. Thus its market share should continue to expand as the global gaming market grows approximately 9% per annum to 315 billion USD by 2027. 

Generally, investing in an IPO is riskier than investing in a stock already known to the public market, either through an American exchange like the NYSE or a European exchange like the LSE. 

However, there remain a few essential items to have on your analytical checklist no matter the stock or sector. 

1. Gross revenue (“top line”);
2. The revenue drivers, such as active user or member growth;
3. Profit margins, often EBITDA as a percentage of top line; EBITDA means “earnings before interest, tax, depreciation, and amortization;
4. Its private valuation growth, earned whenever a private capital raising with major investors, hedge funds, or banks occurs;
5. Cumulative funding and current (pre-IPO) investors;
6. The management team;
7. Its competitors.

If an “IPO Filing” has already occurred, a great place to start is taking the time to read through any stock’s original prospectus available on SEC. This helps cut through the noise and hype typically surrounding an IPO. Finding such information prior to an IPO filing remains difficult, yet reputable trade journals such as Forbes, WSJ, Crunchbase, or TechCrunch provide meaningful estimates. 

With respect to Discord’s IPO, please see below, noting data is in USD and from the end of 2021 unless otherwise stated:

1. 2020 revenue count: 130 million, a 188% year-over-year (yoy) increase;
2. Monthly active user count: 140 million, a 40% yoy increase;
3. Active server count: 13.5 million, a 101% yoy increase;
4. Private valuation: 15 billion, a 114% yoy increase;
5. Total cumulative funding: 995 million, with well-known names such as Franklin Templeton, Baillie Gifford, Sony, and Dragoneer part of the current investor group;
6. Management: Discord’s CEO is Jason Citron, who alongside his former colleague Danielle Cassley already sold mobile game platform OpenFeint for 104 million in 2011; it had 100 million users at the time;
7. While Discord’s closest parallel is TeamSpeak, a primary competitor we do have info on is Twitch, which has also grown exponentially.

And there you have a quick snapshot of Discord. It’s important to remember that you want to see consistent growth over several years (at least three) without any breaks in momentum. 

Further, we suggest to estimate the possible money-generating activities post-IPO. Will they rely upon advertising? How will that affect the average user experience? Will they opt for paid or “premium” memberships?

The Bottom Line

We’re excited about Discord’s IPO, and we’re not even gamers. We don’t need to be–Discord has successfully started expanding into non-gaming sectors. 

However, they tapped into an incredibly expanding market, lifting several competitors at once: gaming. The boost provided to online gaming from coronavirus remains what analysts call “sticky.”